Tracking the onslaught of new lawsuits filed in response to the COVID-19 crisis has demonstrated that three primary categories of plaintiffs are bringing these claims against companies:
- Employees; and
(My updated list of COVID-19 class actions (available here), tracks these three plaintiff classifications with the several subspecies of consumer claims.) Studying the legal theories that plaintiff firms are crafting—both individual claims and class actions—even in the middle of the crisis is a useful exercise for those of us preparing to defend our clients against similar claims in the coming months. Gleaning insights from these newly-filed lawsuits is also among the highest and best use of time for in-house loss prevention professionals during these weeks.
Why Employment Claims Lag Behind Consumer Claims
As predicted a few weeks ago, the volume of COVID-19 employment class actions is initially lagging behind the consumer claims. The consumer claims lead the pack by a wide margin. But we expect employment filings to pick up pace in the coming weeks. One reason for the delay in employment case filings is that the operative facts relating to these claims are still unfolding in real time as employees are being required to work remotely or perform essential services under extraordinary conditions, encountering risks never contemplated.
Potential claims against employers are widely varied as reflected in a “top six” list of employee claims I gave in a webinar last month. One of the COVID-19 claims filed earlier this week, although not a class action, prompts me to add a seventh distinct risk for employers: claims by employee “whistleblowers” alleging retaliation for reporting compliance concerns, including compliance with ever-evolving health and safety guidelines and regulations.
The New Trader Joe’s Claim
In Kristopher King v. Trader Joe’s East, Inc.., filed in state court in Kentucky, a Trader Joe’s employee is asserting claims relating to his termination for voicing concerns relating to working conditions. (Although not a client—I never write about litigation against current Dorsey clients—this lawsuit targets one of my favorite companies. My family and I are loyal Trader Joe’s customers and we have a friend bravely working there on the front lines of this pandemic.)
In his lawsuit against Trader Joe’s, Mr. King alleges that on March 13, he created a private Facebook group with his fellow employees to address their collective concerns about Trader Joe’s alleged lack of support in implementing specific safety measures for its employees. Upon his return to work from a short illness on March 21, Mr. King was confronted by his manager who had learned of the private Facebook group and did not approve of the statements. Mr. King admitted to creating the group and reiterated his concerns about the health and safety of the employees interacting with the public. He urged the company to make several changes in order to comply with the Kentucky Governor’s Executive Orders and CDC Guidelines. The changes he urged included providing additional sanitizers and cleaning products, giving employees gloves to be changed with each customer contact and allowing employees to wear masks.
The Trader Joe’s manager allegedly urged Mr. King to resign if he was so concerned about these issues. When he refused to do so, Mr. King was allegedly terminated on March 28. According to Mr. King, in communicating the news of the termination, Trader Joe’s management “specifically referenc[ed] the creation of the Facebook group page and post with other Trader Joe’s employees in an effort to voice their concerns and complaints.” An April 2 New York Times article followed and now Trader Joe’s faces a lawsuit asserting a variety of claims including a discharge in violation of public policy.
(Update: Hours after this was posted, a second whistleblower lawsuit was also filed in Kentucky by an employee against her funeral home employer. See Norris v. Schoppenhorst-Underwood Brooks Funeral Home, LLC.)
A Whistleblower Era
Reviewing these claims against Trader Joe’s (as well as a recent class action against the State of Alaska (Alaska State employees v. State of Alaska)) prompts me to consider the connection between the top two major stories in this far too eventful year: the COVID-19 outbreak and the Trump impeachment trial. Although it now seems like ancient history, it was only a few months back that our nation was fixated on the impeachment trial of President Trump. From start to finish, that saga centered around the claims of a whistleblower. Just as other impeachment trials in recent years have impacted Americans’ perspectives on matters beyond politics, the Trump impeachment trial has, among other things, burnished in our collective consciousness the power that a rank-and-file whistleblower holds and the protections the law provides against retaliation against such employees.
Even if the whistleblowing impeachment story had not been immediately followed by the current health crisis, it would have been reasonable to expect an increase in both whistleblowing claims and related employee claims alleging retaliation by employers. But the combination of these two major events in 2020 may present a perfect storm for whistleblower retaliation cases in the immediate future.
COVID-19 Whistleblower Claims
The challenges employers face in the COVID-19 crisis are daunting. While attempting to keep the business afloat and profitable, employers are scrambling to comply with all types of federal, state and local regulations of general applicability, in addition to the new directives being rolled out on a daily basis. Conflicting messages from various governmental entities only add to the confusion. These challenges will continue into the coming weeks as workplaces transition to the new normal—whatever that may look like.
The lawsuit against Trader Joe’s provides a rough outline of a whistleblower retaliation claim arising from COVID-19 and what an employer should not do (assuming for the moment, the core allegations are accurate). The lawsuit underscores the fact that all employers, both public and private companies, are susceptible to these types of claims. While public companies and government contractors have long been accustomed to managing risks associated with whistleblower claims and employee protections against retaliation under the Sarbanes-Oxley Act and the False Claims Act, it would be a mistake for any employer to disregard these risks, as virtually any employee in almost every jurisdiction may assert some variation on such a claim.
California has enacted a rather robust statute protecting employees from retaliation by an employer. Cal. Lab. Code § 1102.5. The law prohibits an employer from enacting a policy that prevents an employee “from disclosing information to a government or law enforcement agency, to a person with authority over the employee, or to another employee who has authority to investigate, discover, or correct the violation or noncompliance, or from providing information to, or testifying before, any public body conducting an investigation, hearing, or inquiry, if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee’s job duties.” Cal Lab Code § 1102.5(a). The law separately prohibits retaliation against an employee for engaging in these activities. Cal. Lab. Code § 1102.5(b). The law further prohibits an employer from retaliating against an employee “refusing to participate in an activity” that would result in a violation of the law. Cal. Lab. Code § 1102.5(c). There is even a provision that covers an employer’s retaliation “because the employee is a family member of a person who has, or is perceived to have, engaged in any acts protected by this section.” Cal. Lab. Code § 1102.5(h). There are thus several ways in which an employer can violate the statute. The California statute has features designed to provide teeth to the prohibitions, including the right to recover a substantial penalty and attorney fees (only the successful employee-plaintiff can recover, not the successful employer-defendant). Cal Lab Code § 1102.5(f) and (j).
Even in states that do not have a detailed statute like California’s, whether by statute or judicially-created rules, most all jurisdictions recognize an exception to the general rule that an at-will employee can be terminated with or without cause: a termination of an employee in violation of public policy may give rise to a wrongful discharge claim. A discharge in retaliation for whistleblowing will in almost every instance constitute such a termination.
What Steps Can Employers Take to Avoid These Claims?
The risk to employees are significant—perhaps more today than before the combination of whistleblower stories and pandemic issues came to the horizon. Prudent and vigilant employers are searching for ways to mitigate this risk.
The prophylactic measures employers can take to avoid these types of employee lawsuits range from the obvious policies to the more nuanced, and vary depending on the size of the organization. A few guiding principles should be considered in mitigating this litigation risk and creating a robust defense against these types of claims:
- Beginning with the obvious, an employee should never be terminated for complaining about a perceived violation of law or health and safety issues. The claim against Trader Joe’s—at this point, merely unsubstantiated allegations—is that Mr. King was expressly discharged on the basis of his concerns about violations of health and safety directives. In the more typical retaliation claim, the employee alleges that his or her termination for another reason (e.g., a layoff or tardiness) was a mere pretext or that he or she was constructively discharged because the blowback from raising his or her concerns created intolerable working conditions.
- Now is a good time to review the organizational structures and reporting mechanisms for employees to express concerns ranging from health and safety to fraud and embezzlement. Some companies field these calls internally through a human resources group and others use an outside service that allows for anonymity in fielding the calls.
- Employers should take steps to remind employees, particularly those in supervisory or management positions, of the need to take seriously any concern raised by an employee. Processes must be implement so that complaints can be escalated to the appropriate department or individuals. A process for documenting the concern, resolving the compliance issue and, above all, ensuring against retaliatory complaints, should be implemented and updated as with organizational changes.
- In training or retraining all levels of management on these issues, it is important to remind employees that, under most statutory schemes, the law protects a whistleblower against retaliation regardless of the merits of the claim. An employee who, under a mistake of fact or law, raises concerns that are not merited and faces retaliation may still assert a claim.
Defending employers against these types of claims presents inherent challenges for lawyers defending employees. Based on my own experience in defending clients in these cases, there are many frivolous retaliation claims. Employees aware of these protections and desiring to negotiate a lucrative severance package may quit for their own reasons and manufacture an after-the-fact story about some technical violation they raised with a supervisor months before. Courts have worked to weed out these meritless claims by requiring evidence a causal connection between the alleged termination and the employee’s complaint. Whistleblowing cases nonetheless remain an active area of the law for employee plaintiff lawyers to pursue.
The New List of COVID-19 Employee Claims
Preventing and defending against a whistleblower retaliation claim is even more challenging in the current pandemic. Management and HR staff are being forced to make rapid-fire assessments of risks, address employee concerns about working conditions, adapt from normal practices and structures and forego some of the daily oversight over employers working remotely.
So while it did not make my initial list (for which I received valuable insight from two of my L&E partners), I would now add whistleblower retaliation claims to the types of potential employee lawsuits that we continue see in the coming weeks. The new list of potential claims against employers is as follows:
- WARN Act Claims: The announcement of layoffs will likely result in a number of claims relating to compliance with the WARN Act and similar state laws, including questions of whether certain exemptions apply.
- Wage & Hour Claims: As a result of employees working remotely, standard operating procedures and controls relating to meal and rest breaks have been disrupted. A lack of adequate recordkeeping and oversight increases the risk of wage and hour claims, including overtime pay. The use of personal equipment for business purposes triggers questions and claims relating to companies’ reimbursement policies.
- Employee Safety and Claims: Companies have been required to balance urgent business needs with employee health and safety during the crisis. There will likely be class actions relating to exposures to the virus in the workplace. In addition, the stress of the pandemic and resulting mental health needs will increase the likelihood of individual as well as class claims.
- [NEW] Whistleblower Claims: Employees claiming to be subject to retaliation for raising concerns about health and safety or compliance with laws, including COVID-19-related directives.
- ERISA Claims: As the bottom falls out of 401ks and pension plans, there will likely be ERISA claims. Any down market prompts greater scrutiny of past fiduciary decisions. This is a risk even after Retirement Plans Committee of IBM v. Jander, (No. 18-1165)
- Employee Medical Privacy Claims: Employee privacy claims are likely to follow as the manner in which companies handle sensitive information concerning employees’ medical diagnoses is questioned. This includes internal as well as external reporting. If employee records, normally maintained on a secured server, are accessed and stored outside the normal environment, there are risks relating to unauthorized access to private information and resulting privacy claims.
- Disparate Impact Layoffs: As companies address the need for layoffs and furloughs, the disparate impact of decisions on who is retained and who is terminated will face scrutiny, opening the door to possible claims for age discrimination.